IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 18-30817

MCDONNEL GROUP, L.L.C., 

 Plaintiff - Appellant

v.

GREAT LAKES INSURANCE SE, UK BRANCH, Improperly named as 

Certain Underwriters at Lloyd’s, London; LLOYD’S SYNDICATES, CNP 

4444 and CNP 958, Improperly named as Certain Underwriters at Lloyd’s, 

London; INTER HANNOVER, Improperly named as Certain Underwriters at 

Lloyd’s, London, 

 Defendants - Appellees

Appeal from the United States District Court

for the Eastern District of Louisiana

Before JOLLY, JONES, and DENNIS, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

In this appeal, relating to arbitration under the Convention on the 

Recognition and Enforcement of Foreign Arbitral Awards,1 we address

 

1 June 10, 1958, 21 U.S.T. 2517. Congress implemented the Convention by enacting 

Chapter 2 of the Federal Arbitration Act (FAA), 9 U.S.C. § 201 et seq.

United States Court of Appeals

Fifth Circuit

FILED

May 13, 2019

Lyle W. Cayce

Clerk

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whether a “conformity to statute” provision2 amends the insurance contract so 

as to conform with a conflicting, but preempted, state statute forbidding 

arbitration in insurance contracts. 

McDonnel Group, L.L.C. purchased an insurance policy from the 

defendants that included a written agreement to arbitrate disputes. After the 

Insurers denied McDonnel’s claim, McDonnel initiated this declaratory and 

breach of contract action in federal district court. The Insurers moved to 

dismiss based on the policy’s arbitration provision. McDonnel responded that 

the arbitration provision was “amended out” of the contract through the 

contract’s conformity to statute provision because arbitration conflicted with a

Louisiana statute. The district court held, however, that the allegedly 

conflicting Louisiana statute was preempted by the Convention, and therefore 

dismissed the case in favor of arbitration. We must decide whether the policy’s 

conformity provision negates the agreement to arbitrate. We hold that it does 

not and thus AFFIRM the district court.

I.

In fall 2015, McDonnel Group, L.L.C. obtained a builder’s risk insurance 

policy from a group of insurers3 for a construction project on a property located 

in New Orleans, Louisiana. Two years later, according to McDonnel, the 

property suffered significant water damage. McDonnel submitted a claim that

the Insurers refused to pay.

 

2 The conformity provision in this case provides: “In the event any terms of this Policy

are in conflict with the statutes of the jurisdiction where the Insured Property is located, such 

terms are amended to conform to such statutes.” 

3 The insurers consist of Great Lakes, Insurance SE, UK Branch; International 

Insurance Company of Hannover SE; and Lloyd’s syndicates CNP 4444 and CNP 958. For 

the sake of brevity, we will refer to them collectively as “the Insurers.”

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McDonnel then filed the instant action seeking declaratory relief and 

damages for breach of contract and breach of the duty of good faith and fair 

dealing. The Insurers responded by filing a motion to dismiss for lack of 

subject-matter jurisdiction and improper venue.4 Fed. R. Civ. P. 12(b)(1), (3). 

As to both defenses, the Insurers invoked the contract’s arbitration provision, 

which provides:

Any dispute, controversy or claim arising out of, relating to, or in 

connection with this Policy, shall be finally settled by arbitration. 

The arbitration shall be conducted in accordance with the 

International Arbitration Rules of the American Arbitration 

Association in effect at the time of the arbitration. The seat of the 

arbitration shall be New York, New York, in the United States of 

America.

The Insurers argued that the arbitration provision should be enforced, and the 

case dismissed in favor of arbitration pursuant to the Convention.

The policy, however, also contained a “conformity to statute” provision, 

stating: “In the event any terms of this Policy are in conflict with the statutes 

of the jurisdiction where the Insured Property is located, such terms are 

amended to conform to such statutes.” Invoking that provision, McDonnel 

responded that any obligation to arbitrate under the Convention did not apply 

to the instant dispute because the policy’s arbitration agreement was, as a 

matter of law, invalid. The arbitration provision was contrary to La. Rev. Stat. 

Ann. § 22:868(A)(2), which prohibits arbitration agreements in insurance 

contracts covering property located in the state. Thus, the conformity 

provision, McDonnel argued, “amended” the arbitration provision out of the 

contract in order to “conform” with Louisiana law. Consequently, the dispute 

between McDonnel and the Insurers was not subject to the Convention.

 

4 The Insurers also asserted other alternative grounds for dismissal that are not 

relevant to this appeal.

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The district court disagreed. Relying on the decision of our en banc court 

in Safety Nat’l Cas. Corp. v. Certain Underwriters at Lloyd’s, the court held

that the Convention superseded La. Rev. Stat. Ann. § 22:868. 587 F.3d 714 

(5th Cir. 2009). Because the state statute was preempted by federal law, the 

court determined that no conflict existed between the policy and state law so 

as to trigger the conformity provision of the policy. Thus, the arbitration 

agreement remained valid. The district court, therefore, dismissed the action

in favor of arbitration. The parties, accordingly, present a precise issue in this 

appeal: does the contractual agreement to conform to state statutes apply when 

the conflicting state statute has been held as a matter of law to have been 

preempted by the Convention.

II.

The standard of review for a dismissal pursuant to both Federal Rules of 

Civil Procedure 12(b)(1) and 12(b)(3) is de novo.5 See Ambraco, Inc. v. Bossclip 

B.V., 570 F.3d 233, 237–38 (5th Cir. 2009). The well-pleaded factual 

allegations in the complaint are taken “as true and [we] view them in the light 

most favorable to the plaintiff.” See Lane v. Halliburton, 529 F.3d 548, 557 

(5th Cir. 2008) (citing In re Katrina Canal Breaches Litig., 495 F.3d 199, 205 

(5th Cir. 2007)). 

 

5 Our court has not decided whether Rule 12(b)(1) or 12(b)(3) is the proper vehicle for 

a motion to dismiss based on an arbitration provision. See Noble Drilling Servs., Inc. v. Certex 

USA, Inc., 620 F.3d 469, 472 n.3 (5th Cir. 2010). We have, however, accepted Rule 12(b)(3) 

as a proper method for seeking dismissal in favor of arbitration. See Lim v. Offshore Specialty 

Fabricators, Inc., 404 F.3d 898, 902 (5th Cir. 2005). The parties have not raised whether 

dismissal under Rule 12(b)(1) would also be proper and therefore we will not address this 

issue.

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III.

A.

Although quite elemental to say, it is relevant here to point out that 

under our constitutional system, federal law, including the treaties of the 

United States, are the “supreme Law of the Land . . . any Thing in the 

Constitution or Laws of any State to the Contrary notwithstanding.” U.S. 

Const. art. VI, cl. 2. From the Supremacy Clause stems our preemption 

doctrine: when federal and state law conflict, the state law is nullified. See 

Fid. Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 152–53 (1982). This 

case presents such a conflict. We thus begin our discussion with a review of 

the state and federal laws at issue.

First the state law: Louisiana’s insurance code. See La. Rev. Stat. Ann. 

§ 22:1 et seq. Specifically, § 22:868(A)(2) provides that “[n]o insurance contract 

delivered or issued for delivery in [Louisiana] and covering subjects located . . 

. in [Louisiana] . . . shall contain any condition, stipulation, or agreement . . . . 

[d]epriving the courts of [Louisiana] of the jurisdiction of action against the 

insurer.” Louisiana’s state courts have interpreted § 22:868 as rendering void 

arbitration provisions in insurance contracts. See, e.g., Doucet v. Dental Health 

Plans Mgmt. Corp., 412 So. 2d 1383, 1384 (La. 1982) (“Classification of the 

contract at issue as an insurance contract renders the arbitration provisions of 

that contract unenforceable under [§ 22:868].”). 

Next the federal law. In 1958, the United States joined and adopted the 

Convention, an international commercial treaty, to “encourage the recognition 

. . . of commercial arbitration agreements in international contracts and to 

unify the standards by which agreements to arbitrate are observed.” Scherk v. 

Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974). The Convention requires 

signatory states to “recognize an agreement in writing under which the parties 

undertake to submit to arbitration all or any differences which have arisen or 

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which may arise between them in respect of a defined legal relationship, 

whether contractual or not, concerning a subject matter capable of settlement 

by arbitration.” Convention art. II(1). When the Convention is applicable, 

courts of signatory states must “at the request of one of the parties, refer the 

parties to arbitration, unless it finds that the . . . agreement is null and void, 

inoperative or incapable of being performed.” Id. at art. II(3). This court has 

succinctly described the Convention’s trigger as consisting of four elements; a 

district court must dismiss a case in favor of arbitration “if (1) there is an 

agreement in writing to arbitrate the dispute, (2) the agreement provides for 

arbitration in the territory of a Convention signatory, (3) the agreement arises 

out of a commercial legal relationship, and (4) a party to the agreement is not 

an American citizen.” Francisco v. STOLT ACHIEVEMENT MT, 293 F.3d 270, 

273 (5th Cir. 2002). Like all treaties, the Convention ordinarily preempts 

conflicting state laws. See, e.g., Lim, 404 F.3d at 904. 

But the appeal today presents a twist. The McCarran–Ferguson Act, 

passed by Congress in 1945, protects state laws regulating the insurance 

industry from the preemptive effect of federal law. This Act “declares that the 

continued regulation . . . by the several States of the business of insurance is 

in the public interest, and that silence on the part of the Congress shall not be 

construed to impose any barrier to the regulation . . . of such business by the 

several States.” 15 U.S.C. § 1011; see also 15 U.S.C. § 1012(a) (“The business 

of insurance . . . shall be subject to the laws of the several States.”). To shield

state regulation from unintended federal interference, the Act provides that 

“[n]o Act of Congress shall be construed to invalidate, impair, or supersede any 

law enacted by any State for the purpose of regulating the business of 

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insurance.”6 Id. § 1012(b). In other words, the McCarran–Ferguson Act 

permits states to reverse-preempt an otherwise applicable “Act of Congress” by 

enacting their own regulations of the insurance industry.

Against this background, in Safety National, our en banc court addressed 

whether, under the McCarran–Ferguson Act, La. Stat. Rev. § 22:868 reversepreempted the Convention or its implementing legislation. 587 F.3d at 717. 

We found that it did not. An “Act of Congress,” as referred to in the McCarran–

Ferguson Act, does not include a treaty, such as the Convention, which 

“remains an international agreement or contract negotiated by the Executive 

Branch and ratified by the Senate, not by Congress.” Id. at 723 (footnotes 

omitted). This governing principle is true whether the treaty is self-executing 

or requires implementing legislation. Id. at 723–24. And, importantly, the 

FAA itself points towards the Convention, stating that “[i]t is the Convention

[not the congressional legislation] under which legal agreements ‘fall.’” Id. at 

724 (quoting 9 U.S.C. § 202). It is therefore the Convention itself, i.e., the 

treaty, not the FAA, i.e., the federal statute that codified the treaty, that 

supersedes Louisiana law. Id. at 724–25. Thus, the en banc court held that, 

because “the Convention, an implemented treaty . . . supersedes state law, the 

McCarran–Ferguson Act’s provision that no ‘Act of Congress’ shall be 

construed to supersede state law regulating the business of insurance is 

inapplicable.” Id. at 725. To the point: the McCarran–Ferguson Act does not 

permit state laws to reverse-preempt the Convention. Id. at 732. This appeal 

is not yet resolved, however.

 

6 The Act does contain an exception if the “Act [of Congress] specifically relates to the 

business of insurance.” 15 U.S.C. § 1012(b). The Convention does not relate to the business 

of insurance, so this exception does not apply. See Safety Nat’l, 587 F.3d at 720. 

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B.

We now turn to the analysis of the precise issue before us, which we 

break down as follows: whether (1) an agreement to arbitrate (2) provided in 

an insurance policy (3) is voided by the policy’s conformity provision (4) when 

the conflicting state law prohibiting arbitration (5) has been preempted by the 

Convention.7 McDonnel argues that the arbitration provision was amended by 

deletion from the contract ab initio because it conflicts with La. Rev. Stat. Ann. 

§ 22:868. The Insurers respond that there is no conflict between the contract 

and § 22:868 because the Convention preempts this state law. 

This issue, which is only a question of contract interpretation, is of first 

impression. Although Safety National has already decided the more difficult 

questions regarding preemption and reverse preemption, the insurance 

contract in that case did not contain a conformity provision. So, what does the 

contract between McDonnel and the Insurers provide? We focus on two 

provisions. First, it contains a conformity provision, which amends the terms 

of the contract to conform to state statutes. But that provision only applies

“[i]n the event any terms of [the] Policy are in conflict with the statutes of the 

jurisdiction where the Insured Property is located.” Second, the policy contains 

an arbitration provision. It is the arbitration provision of the insurance policy

that is said not to conform with La. Rev. Stat. Ann. § 22:868, a statute 

prohibiting arbitration agreements. This state statute, however, as we held in 

Safety National, is preempted by the Convention.8 Because the state statute, 

 

7 A reminder that we have already held that the Convention preempts this Louisiana 

statute. See Safety Nat’l, 587 F.3d at 732.

8 The Convention’s requirements are clearly met in this case. The provision is a 

written agreement to arbitrate the dispute; it provides for arbitration in a signatory country, 

the United States; it arises from a commercial legal relationship, an insurance contract; and 

the Insurers are not American citizens. See Francisco, 293 F.3d at 273. 

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i.e., La. Rev. Stat. Ann. § 22:868, is preempted by the Convention, the statute 

does not and cannot apply to McDonnel’s policy. And because the statute does 

not apply to the policy, there is no conflict between the policy and the state 

statute. With that premise established, the conformity provision is not 

triggered; its inapplicability leads only to the conclusion that the arbitration 

provision survives, undiminished by state law.9 The district court judgment in 

favor of the Insurers will be and is

AFFIRMED.

 

9 Our holding is consistent with our precedent that conformity provisions in insurance 

contracts are not triggered when the conflicting state law is preempted by the Employee 

Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. See La. Health 

Serv. & Indem. Co. v. Rapides Healthcare Sys., 461 F.3d 529, 533 (5th Cir. 2006) (“Neither 

[conformity] provision displaces the preemption analysis in this case. ERISA plans must 

always conform to state law, but only state law that is valid and not preempted by ERISA.”); 

Light v. Blue Cross & Blue Shield of Ala., Inc., 790 F.2d 1247, 1248 (5th Cir. 1986) (holding 

that because “ERISA pre-empts state law, there is no applicable state law to which the 

administrator must conform”).

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